PhillipCapital analyst Paul Chew is positive on Food Empire&rsquo s F03 -1.87% prospects in Vietnam.

 

In an unrated report dated Sept 5, Chew noted that the company had built up a market share of about 14% in the country&rsquo s instant coffee market which was worth around US$400 million ($544.2 million).

 

Food Empire established its Maccoffee brand in Vietnam around a decade ago since the introduction of its flagship Café Pho in 2013.

 

&ldquo We believe in Food Empire&rsquo s key 3-in-1 brand, Café Pho. The competitive advantage is the brand image as best tasting coffee served with ice (70% of coffee consumption is with ice) and deep penetration into the street shops (or general trade) distribution network,&rdquo Chew writes.

 

Some of his observations from his trip to Vietnam&rsquo s Ho Chi Minh City in Aug 29 to 30 include brand stickiness within consumers. Consumers in the country also seem to prefer strong-tasting coffee, which Café Pho offers even with ice. Another advantage to Food Empire is Ho Chi Minh City&rsquo s consumers&rsquo preference for instant coffee.

 

At the same time, Chew notes that the city&rsquo s younger generation prefers tea and consumes their coffee at coffee shops as social drinkers. &ldquo Instant coffee drinkers usually start in their mid-30s,&rdquo he notes. &ldquo To capture this group of customers, frequent taste tests, product display visibility and distribution is critical.&rdquo

 

In his view, Food Empire&rsquo s growth will stem from three key drivers, which include the organic growth of about 3% to 5% per annum within the instant coffee market. Chew&rsquo s estimates are in line with Vietnam&rsquo s GDP and new coffee consumers. Food Empire is also set to enjoy market share gains from expanding geographically thereby capturing more instant coffee consumers. Finally, the company&rsquo s new products for their local and export markets may capture more consumers where sentiment is currently &ldquo soft&rdquo and consumers are more &ldquo promotion sensitive&rdquo .